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Monday, 03 January 11
TAXATION FOR COAL MINING COMPANIES IN INDONESIA - A TAX EXPERTS VIEW
 COALspot.com - Mrs. Sri Wahyuni Sujono, managing partner of SF Consulting has wrote an exclusive report regarding taxation for coal mining companies in Indonesia for COALspot.com subscribers.
Currently, the conduct of Coal exploration, development and production in Indonesia is regulated by:
1.The Izin Usaha Pertambangan (IUP)/Mining Business License; and
2. The Perjanjian Karya Pengusahaan Pertambangan Batubara(PKP2B)/Coal Contract of Work (CCoW).
Tax Regime for a Coal Mining Company
The IUP company is subject to prevailing Indonesian tax laws. Unlike the CCoW, the IUP regulatory regime does not specify distinct tax rules. A CCoW company taxation terms in the Contract is lex specialis– that is, the terms in the contract override the general tax laws. For example, when certain specific tax rules are set out in a Contract, these tax rules take precedence over the prevailing tax laws. Generally, the tax rules in a Contract reflect those that are in force at the time the contract were signed, although there may be some exceptions. Typically, a Contract fixes the tax rules for the duration of the contract (with the exception of second generation CCAs where they generally follow the prevailing tax regulations).
Income Tax Rate
Under the prevailing Tax Law Regulations, a company is subject to corporate income tax on its net taxable profit. Net taxable profit is calculated based on gross income minus deductible expenses. The prevailing corporate tax rate for 2010 and onward is a flat rate of 25% of net taxable profit. If a Contract stipulates a specific corporate income tax rate, the Contract company may not be entitled to 25% corporate tax.
Income
Gross income usually represents sales of mining products and any other income earned by the mining company.
General Expenses
In general, deductible expenses are expenditures incurred to generate, maintain and collect taxable income and generally include an amount paid or accrued for all expenditures attributable to the company’s operations in a year which typically have a useful life of less than one year. Certain expenditures may not be tax deductible under the prevailing Income Tax law, e.g. donations and benefits-in-kind provided to employees. Some types of benefits-in-kind provided at the mining site may be deductible if the mine is located in a remote area (which is usually the case) and an approval from the DGT is obtained.
Exploration and Development Expenses
Exploration and development expenses may include camp construction, drilling, access road, project communication facilities, etc. On-site exploration expenses are generally deductible in the year the expenses are incurred provided the expenses meet the general deductibility criteria required. Exploration and mine development expenses should generally be capitalized and amortized upon spending rather than production.
Depreciation of Fixed Assets
Fixed assets are categorized into four categories, depending on the nature of the asset and its expected useful life. The rate at which the asset can be depreciated will depend upon the category of the asset. Assets are generally depreciated over 4, 8, 16 or 20 years and taxpayers may apply a diminishing balance or straight line approach to depreciation.
Amortization of Intangible Assets
Intangible assets may include pre-operating costs, patents, rights, licenses, etc. Costs incurred in the acquisition of mining rights with a beneficial life of more than one year should be amortized based on a production unit method, not exceeding 20% per annum.
Tax Losses Carried Forward
Tax losses can be carried forward for up to five years under the Tax Law and are utilized on a first-in-first-out basis. Tax losses cannot be carried back.
Reclamation Reserve
For accounting purposes, a mining company is usually required to maintain a reclamation reserve for environmental management and reclamation work during the contract period and at the end of the life of the mine. The reclamation reserve amount should be tax deductible provided that it is calculated in accordance with the prevailing energy/mineral resources sector laws/regulations. If the actual cost exceeds the reserve, the balance is generally tax deductible.
VAT
Under VAT Law No. 42/2009, coal is not subject to VAT. As a consequence, the input VAT paid to the company’s suppliers are not creditable. Some Contracts may adopt a VAT regime different than the prevailing VAT regulations. For example, there may be provision that Input VAT may be creditable/refundable despite the fact that the coal being produced is not subject to VAT. During the pre-production stage of the Contract, the company shall not have any Output VAT due to there being no delivery of mining product at that point. Therefore, VAT overpayment is likely as the company should pay its Input VAT to vendors for purchases of taxable goods/services. Some Contract companies should collect and pay VAT charged by its vendors (i.e. Output VAT) directly to the State Treasury (act as a VAT collector) as required by the relevant Contract.
Withholding Tax
The Contract company is obliged to withhold income tax from payments of dividends, interest, royalties and most types of services. The Withholding tax rate will depend on the type of service and whether the service provider is a resident or non-resident that stipulated in the tax rules Contract. The general withholding tax rate for services is 2%. The Withholding tax on dividends, interest, royalty paid to Indonesia tax resident is at 15% while for non-resident is set at 20%, though this rate is reduced by most of Indonesia’s double tax avoidance agreements. Some Contracts may provide a reduced Withholding tax rate into nil or 7.5%.
OTHER TAXES
Royalties
Royalties are payable quarterly to the Government based on the actual volume of production according to details set out in the IUP/CCoW. The royalty is tax deductible.
Land and Building Tax
The company is required to pay land and building tax as set out in the IUP/CCoW. Dead rent is an annual charge based on the number of hectares in the Mining Area. The land and building taxes are deductible for income tax.
To download this report click here.
Writer’s Profile :
Mrs. Sri Wahyuni Sujono, graduated with a Business Administration degree from the University of Wisconsin-Madison, USA. She is a certified Tax Attorney, Tax Consultant and holds a Brevet C – the highest working license qualification, and is the managing partner of SF Consulting. Sri also has expertise outside tax consultancy; she is a Chartered Financial Consultant (ChFC) and a qualified lawyer, giving a more holistic outlook and approach to her services.
Sri has had over fifteen years of experience of tax consulting with Arthur Andersen and Ernst and Young Indonesia; three years of which she was a Tax and Business Partner. She is the Vice Chairman of the Taxation Committee at the Indonesian Chamber of Commerce (KADIN), the Head of Foreign Affairs in the Indonesian Tax Consultant Association (IKPI) and sits in the Board of Experts in the Indonesian Chinese Association (INTI).
Disclaimer: This report has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this report without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this report, and, to extent permitted by law. SF Consulting and COALspot.com, its directors, members, employees, agents do not accept or assume any liability, responsibility or duty of care of any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this report or for any decision based on it.
If you believe an article violates your rights or the rights of others, please contact us.
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Monday, 17 July 23
APPROVED AMMONIA-FUELED CONTAINERSHIP - BENEFITS AND RISKS: REED SMITH
Following the news in Offshore Energy that Korea Maritime Consultants has secured approval in principle from the American Bureau of Shipping for it ...
Friday, 14 July 23
CLEAN COAL USE KEY TO DEEP CUTS IN EMISSIONS, STABLE ELECTRICITY SUPPLY - CHINA DAILY
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Thursday, 13 July 23
VIETNAM'S COAL EMISSIONS PRIMED FOR SURGE AFTER IMPORTS JUMP - REUTERS
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Monday, 26 June 23
COAL PRODUCTION AND CONSUMPTION UP IN 2022 - EUROSTAT
In 2022, EU coal production and consumption continued to increase, reaching 349 million tonnes (+5% compared with the previous year) and 454 millio ...
Wednesday, 21 June 23
QATAR STRIKES SECOND BIG LNG SUPPLY DEAL WITH CHINA - REUTERS
Qatar on Tuesday secured its second large gas supply deal with a Chinese state-controlled company in less than a year, putting Asia clearly ahead i ...
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- VISA Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Minerals Council of Australia
- The State Trading Corporation of India Ltd
- MS Steel International - UAE
- Timah Investasi Mineral - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- San Jose City I Power Corp, Philippines
- Sojitz Corporation - Japan
- Eastern Coal Council - USA
- Karaikal Port Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- PowerSource Philippines DevCo
- Medco Energi Mining Internasional
- Economic Council, Georgia
- GMR Energy Limited - India
- Petron Corporation, Philippines
- Coal and Oil Company - UAE
- Bhushan Steel Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Ind-Barath Power Infra Limited - India
- Orica Mining Services - Indonesia
- White Energy Company Limited
- Malabar Cements Ltd - India
- Australian Commodity Traders Exchange
- Heidelberg Cement - Germany
- Grasim Industreis Ltd - India
- Commonwealth Bank - Australia
- Ministry of Mines - Canada
- Indogreen Group - Indonesia
- Power Finance Corporation Ltd., India
- Maheswari Brothers Coal Limited - India
- Kideco Jaya Agung - Indonesia
- CIMB Investment Bank - Malaysia
- Energy Link Ltd, New Zealand
- OPG Power Generation Pvt Ltd - India
- Vedanta Resources Plc - India
- AsiaOL BioFuels Corp., Philippines
- Wilmar Investment Holdings
- Kalimantan Lumbung Energi - Indonesia
- Borneo Indobara - Indonesia
- Antam Resourcindo - Indonesia
- Global Business Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- India Bulls Power Limited - India
- Central Electricity Authority - India
- Electricity Authority, New Zealand
- Interocean Group of Companies - India
- Riau Bara Harum - Indonesia
- Planning Commission, India
- Siam City Cement - Thailand
- Altura Mining Limited, Indonesia
- Energy Development Corp, Philippines
- CNBM International Corporation - China
- Meenaskhi Energy Private Limited - India
- Rio Tinto Coal - Australia
- Kaltim Prima Coal - Indonesia
- Mercuria Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Coastal Gujarat Power Limited - India
- Australian Coal Association
- Indian Oil Corporation Limited
- Chamber of Mines of South Africa
- Binh Thuan Hamico - Vietnam
- Indika Energy - Indonesia
- Semirara Mining Corp, Philippines
- Vizag Seaport Private Limited - India
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- Meralco Power Generation, Philippines
- Georgia Ports Authority, United States
- Ceylon Electricity Board - Sri Lanka
- Petrochimia International Co. Ltd.- Taiwan
- ICICI Bank Limited - India
- Standard Chartered Bank - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Goldman Sachs - Singapore
- Kartika Selabumi Mining - Indonesia
- Sindya Power Generating Company Private Ltd
- Lanco Infratech Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- South Luzon Thermal Energy Corporation
- Directorate General of MIneral and Coal - Indonesia
- European Bulk Services B.V. - Netherlands
- Pendopo Energi Batubara - Indonesia
- Therma Luzon, Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- International Coal Ventures Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Krishnapatnam Port Company Ltd. - India
- Chettinad Cement Corporation Ltd - India
- PTC India Limited - India
- Thiess Contractors Indonesia
- McConnell Dowell - Australia
- Neyveli Lignite Corporation Ltd, - India
- Indo Tambangraya Megah - Indonesia
- Cement Manufacturers Association - India
- New Zealand Coal & Carbon
- Savvy Resources Ltd - HongKong
- Siam City Cement PLC, Thailand
- Madhucon Powers Ltd - India
- Jaiprakash Power Ventures ltd
- GVK Power & Infra Limited - India
- Essar Steel Hazira Ltd - India
- Toyota Tsusho Corporation, Japan
- Metalloyd Limited - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Formosa Plastics Group - Taiwan
- Ministry of Finance - Indonesia
- Agrawal Coal Company - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parry Sugars Refinery, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Salva Resources Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bulk Trading Sa - Switzerland
- Ministry of Transport, Egypt
- GN Power Mariveles Coal Plant, Philippines
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- Star Paper Mills Limited - India
- TeaM Sual Corporation - Philippines
- Romanian Commodities Exchange
- Jindal Steel & Power Ltd - India
- Marubeni Corporation - India
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- Gujarat Electricity Regulatory Commission - India
- Global Green Power PLC Corporation, Philippines
- SMG Consultants - Indonesia
- Carbofer General Trading SA - India
- Bharathi Cement Corporation - India
- Gujarat Mineral Development Corp Ltd - India
- Ambuja Cements Ltd - India
- Latin American Coal - Colombia
- PNOC Exploration Corporation - Philippines
- Africa Commodities Group - South Africa
- Attock Cement Pakistan Limited
- IEA Clean Coal Centre - UK
- Uttam Galva Steels Limited - India
- Simpson Spence & Young - Indonesia
- Manunggal Multi Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Oldendorff Carriers - Singapore
- Gujarat Sidhee Cement - India
- Trasteel International SA, Italy
- Anglo American - United Kingdom
- Indian Energy Exchange, India
- Cigading International Bulk Terminal - Indonesia
- Coalindo Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Mercator Lines Limited - India
- Electricity Generating Authority of Thailand
- Mintek Dendrill Indonesia
- Miang Besar Coal Terminal - Indonesia
- Makarim & Taira - Indonesia
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- SMC Global Power, Philippines
- Eastern Energy - Thailand
- Barasentosa Lestari - Indonesia
- Dalmia Cement Bharat India
- Central Java Power - Indonesia
- IHS Mccloskey Coal Group - USA
- London Commodity Brokers - England
- Port Waratah Coal Services - Australia
- Bhoruka Overseas - Indonesia
- Intertek Mineral Services - Indonesia
- Bukit Makmur.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Thai Mozambique Logistica
- Semirara Mining and Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Straits Asia Resources Limited - Singapore
- LBH Netherlands Bv - Netherlands
- Singapore Mercantile Exchange
- Holcim Trading Pte Ltd - Singapore
- Rashtriya Ispat Nigam Limited - India
- Bangladesh Power Developement Board
- Orica Australia Pty. Ltd.
- Sarangani Energy Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Samtan Co., Ltd - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Indonesian Coal Mining Association
- Xindia Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Deloitte Consulting - India
- Mjunction Services Limited - India
- Sical Logistics Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Kumho Petrochemical, South Korea
- Videocon Industries ltd - India
- Bhatia International Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Baramulti Group, Indonesia
- Price Waterhouse Coopers - Russia
- Banpu Public Company Limited - Thailand
- Independent Power Producers Association of India
- ASAPP Information Group - India
- Alfred C Toepfer International GmbH - Germany
- The University of Queensland
- Larsen & Toubro Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- The Treasury - Australian Government
- Tata Chemicals Ltd - India
- Kobexindo Tractors - Indoneisa
- Aboitiz Power Corporation - Philippines
- Posco Energy - South Korea
- Parliament of New Zealand
- Iligan Light & Power Inc, Philippines
- Renaissance Capital - South Africa
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